ITEM: CONSENT CALENDAR

8. CONSIDER AUTHORIZATION OF AN AGREEMENT TO PROVIDE ARBITRAGE CALCULATION SERVICES FOR THE CARMEL AREA WASTEWATER DISTRICT/PEBBLE BEACH COMMUNITY SERVICES DISTRICT (CAWD/PBCSD) WASTEWATER RECLAMATION PROJECT CERTIFICATES OF PARTICIPATION

Meeting Date: October 30, 2003 Budgeted: No (Reimbursed by the Reclamation Project)

Staff Contact: Rick Dickhaut Program/Line Item No.: N/A

Cost Estimate: $10,000

General Counsel Approval: N/A

Committee Recommendation: The Administrative Committee reviewed this item on October 14, 2003 and recommended approval.

CEQA Compliance: N/A

SUMMARY: Annual arbitrage calculations are required on the outstanding certificates of participation issued by the District in 1992 to fund the Carmel Area Wastewater District/Pebble Beach Community Services District (CAWD/PBSCD) Wastewater Reclamation Project (Project). The calculations, and the resulting reports, for the period July 1, 2002 through July 1, 2003 are now due. The total cost for the work is $10,000. There is no direct financial impact to the Monterey Peninsula Water Management District funds because payment is charged as bond carrying costs to the Projects O&M account.

RECOMMENDATION: District staff recommends that the General Manager be authorized to execute an agreement for $10,000 with Arbitrage Compliance Specialists, Inc. for preparation of the required arbitrage and yield restriction reports. The Administrative Committee reviewed this item on October 14, 2003 and voted 3 to 0 to recommend approval.

BACKGROUND: In 1992, the District issued $33,900,000 of variable rate certificates of participation to finance the CAWD/PBCSD Wastewater Reclamation Project. The Internal Revenue Code requires the District to conduct periodic calculations to determine if interest earnings on the proceeds of the sale of the certificates for the Project exceed the interest paid to the holders of the certificates. The calculations result in reports of rebate computations that must be done for each year the debt is outstanding and reports of yield restriction calculations that must be done for each quarter. Excess interest earnings, if any, are referred to as arbitrage and must be paid to the Internal Revenue Service. Since the inception of the project, the services of Arbitrage Compliance Specialists, Inc. (ACS) have been used to make the required calculations and prepare the two required reports. ACS has done an excellent job of preparing these calculations and reports and there would be a considerable learning curve to switch to a different arbitrage calculation firm.

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